Changes to superannuation, tax concessions for salaried and small businesses have dominated this year’s federal budget.
In his first budget speech, federal treasurer Scott Morrison said the coalition has stuck to its plan for ‘jobs and growth'.
“This economic plan is the foundation on which we can build a brighter, more secure future, in a stronger, new economy with more jobs,” said Mr Morrison.
The clear budget beneficiaries are small business owners and middle-income earners.
The treasurer announced a 10-year enterprise tax plan that will cut the small business tax rate to 27.5 per cent, while the company tax rate will be cut to 25 per cent over 10 years.
Treasurer Scott Morrison said that the 2016 Budget was aimed at helping small and medium businesses, which drive jobs growth in Australia.
He's announced a raft of measures which come into effect just days before voters go to the polls.
FOR SMALL BUSINESS OWNERS
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From 1 July this year, the small business tax rate will be lowered to 27.5 per cent.
The turnover threshold for small businesses able to access that rate will increase from $2 million to $10 million.
He says this means businesses with a turnover of less than $10 million will also be able to access other tax incentives, including the small business depreciation pooling provisions, simplified trading stock rules, and the option to use Pay-As-You-Go Instalments payments.
Mr Morrison said around 870,000 businesses, employing 3.4 million Australians, will benefit from a reduced tax rate.
He's also promised to extend access to instant write-off for equipment purchases of up to $20,000 to businesses with a turnover of less than $10 million.
FOR SALARIED PEOPLE EARNING MORE THAN $80k/YEAR
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The government also announced that the upper limit for the middle income tax bracket has been increased from $80,000 to $87,000 per year.
This so-called ‘bracket creep’ will prevent around 500,000 middle income earners from moving into the second highest tax bracket.
“This is about providing room in our tax system for average full-time wage earners to earn more without being taxed more,” said Mr Morrison.
SUPERANNUATION CHANGES
The most wealthy Australians will pay more tax on their superannuation while those at the end of the wage scale will pay less, as part of a swathe of superannuation changes announced in tonight’s federal budget.
The measures promise more flexibility and are expected to provide a net gain of $2.9 billion over four years.
The tax concessions for the country’s wealthiest will be targeted in the following ways:
- The introduction of a transfer balance cap of $1.6 million on amounts moving into the tax-free retirement phases. Balances will be able to increase above the cap, on account of tax-free earnings, once transferred;
- The 30 per cent tax on concessional contributions to those earning over $250,000 will be extended;
- The annual cap on concessional superannuation contributions will be reduced to $25,000;
- A lifetime non-concessional contributions cap of $500,000 will be established.
The transfer balance cap will be applied to both current retirees and to individuals yet to enter the retirement phase.
“The transfer balance cap, lifetime non-concessional cap and the 30 per cent contributions tax will affect less than one per cent of superannuation fund members,” said Mr Morrison.
People earning less than $37,000 won’t pay more tax on their superannuation than they are on their income. The federal government will introduce a Low Income Superannuation Tax Offset from 1 July 2017. This will allow individuals earning up to $37,000 to receive a refund into their superannuation account of the tax paid on their concessional contributions, up to a cap of $500.
“[The offset] will, in particular, assist around 2 million low income women to build their superannuation savings,” Mr Morrison said.
